Read news from:
Austria
SHARE
COPY LINK
PRESENTED BY TAXFIX

Five simple steps to getting your German tax refund

It can’t be avoided – wherever you live, taxes are a certainty. However, the taxes we pay provide an enormous benefit to society, in that they provide a social safety net.

Published: 17 November 2020 08:00 CET
Five simple steps to getting your German tax refund
Photo: Getty Images
Nowhere is this more evident than in Germany, where the wealthiest can expect to pay up to 45% in 'Lohnsteuer', or income tax. Unemployment benefits, pension payments and ‘Kindergeld' (literally ‘child money') for parents are all significant benefits paid for by German taxpayers. 
 
Filing a tax return in Germany is not compulsory (unless you fit into a few select categories). You'd be crazy not to however! With the tax-filing app Taxfix, a return typically takes under half an hour to complete – and the average person gets back more than €1,000. If you're an expat and unfamiliar with how German tax deductions work, you could easily be paying more than your fair share of tax. Here are five simple steps to help you make sure you get your return in on time – and get back all the money you're entitled to. 
 
 
1. Gather your paperwork – and keep it in order 
 
Germans prize organisation and good record keeping as a virtue, and if you follow them in this respect, you'll be well-prepared for tax season. Firstly, do you know the final deadlines for filing a tax return? The last chance to file for 2016 comes on December 31st this year, as part of a four-year rolling cycle.
 
Using a single folder for each tax year and a hole punch will often suffice to keep your receipts and invoices in order, with dividers for different categories, such as fuel receipts, energy bills, food expenses during business trips, and software.
 
If you're intent on reducing your paper waste, there are a number of apps, such as Simple Scan and Microsoft Office Lens, that allow you to photograph your paperwork, turning them into readable PDF files that you can store somewhere on the cloud. This can be handy and a major timesaver at tax time, when you're hunting down figures – new technology means that figures can often be copied and pasted from these files directly. 
 
 
2. Keep up to date on what you can claim.
 
The federal government in Germany often updates legislation regarding what people can claim as deductions against their tax. There are always attempts to close loopholes and maintain tax revenues. Generally, your everyday, regular travel costs to work can be claimed, as can a percentage of home office costs such as internet and power bills. 
 
Other common tax deductions for employees include business literature and work equipment. Personal deductions can be made for a variety of things, including health insurance premiums, childcare expenses up to the age of 14, and charity contributions.
 
Depending on what you do, professional insurance that you may have taken out can also be claimed. However, it pays to check websites such as the official federal government Make It In Germany site for updates in the lead up to tax season. If you're genuinely confused about what you can claim, any tax adviser should be able to help you for a minimal fee. 
 
 
3. Get the help you need in an app (in English!) 
 
Paradoxically, Germany's complex tax system has given rise to a number of apps, websites and services that streamline the process of lodging a tax return. Multiple popular services, including Taxfix, use a series of guided conversational questions to lodge your return, calculating your estimated return based on the answers and data that you provide.
 
The apps work with Elster, the German government's tax return software, to process your return speedily. While you can also file a paper return, and some prefer this method, electronic services save not only time, but a significant amount of paperwork. 
 
Each of these electronic tax services have different strengths – Taxfix especially has been designed with the needs of expats in mind. All questions are in simple, direct English and have been drawn up to make sure you get back all the money you're due under German law. The app aims to make it simple for everyone to claim their full tax refund, even with no prior tax knowledge – so you won't be confronted with confusing jargon!
 
Photo: Taxfix
 
4. Don't rush it – time really is money
 
You can easily feel overwhelmed or confused by the rules of the German tax system. While the temptation may be to click through each question in an app as quickly as possible, you can save potentially hundreds of euros by reading each question carefully, and ensuring you can justify each answer with your records. Even doing so, it won't take anymore than an hour at the most – and isn't that worth a chunk of money landing in your account?
 
5. Avoid hidden costs with a transparent service
 
The amount tax accountants charge can vary wildly. With Taxfix, all costs are set and transparent. If your estimated return is under €50 and you're not obligated to make a return, submitting via Taxfix is free.
 
If your estimated refund is over €50 (or you're obligated to file), there's a single fee of €39.99. That's it. Furthermore, this fee can be claimed against your next return, as tax consulting fees.
 
Ready to find out if you're due a tax refund? Taxfix is available via their website and their app, which can be downloaded from both Google Play and the Apple App Store. Try it out today to see how much money you could get back.
 
For members

TAXES

EXPLAINED: The top tax deductions often overlooked by employees in Germany

Employees in Germany aren't required to file an income tax return - but it's recommended they do as the average filer gets €1,000 back. Here are our top tips to get the most bang for your euro.

Published: 6 June 2023 09:24 CEST
Updated: 6 June 2023 15:25 CEST
EXPLAINED: The top tax deductions often overlooked by employees in Germany

Employees in Germany pay income tax every month – without having to pay it themselves. That’s because employers automatically deduct the monthly amount that their Mitarbeiter (employees) owe straight from their paycheck.

However, the Arbeitgeber (employer) doesn’t usually take the employees’ daily tax-deductible expenses  – ranging from transport to childcare – into account.

It is therefore all the more important for employees to take stock after the end of a year with their tax return and to let the Steueramt (tax office) know which tax deductible expenses have been incurred. 

Note that any employee with extra income – for example renting out a property – always has to file taxes by the yearly deadline. But employees who just receive income from their employer have up to four years after this deadline to claim back expenses.

READ ALSO: What you need to know about Germany’s extended tax filing deadlines

Married couples/domestic partners 

Those who marry or register a civil partnership can benefit from the so-called Ehegattensplitting (spousal splitting) for the first time in that same tax year. In most cases, this reduces the tax burden, according to Germany’s Taxpayers’ Association.

Partners file a joint tax return and choose a joint assessment. The tax office adds the partners’ incomes to a total income and divides it by two. Half of the total income is then used to calculate the tax burden, which is then simply doubled. 

The greater the difference in income between the partners, the more likely it is that joint assessment is worthwhile, Florian Machnow of the tax start-up Taxfix told broadcaster NDR. If both earn the same amount, however, the tax burden does not change.

Taking up a job during the year

Whether unemployed, on sabbatical or entering the workforce for the first time, for example after graduation from uni: those who were only employed for part of the year can most often count on a sizable tax refund.

The reason for this, according to the Taxpayers’ Association, is that the monthly payment of wages is based on the assumption that those wages will be paid for the entire year – and the tax paid is correspondingly high. 

However, if you only receive a salary for part of the year, you will have a much lower annual income – and thus a lower tax burden than assumed by an employer.

German Elster tax platform

The German Elster tax platform. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

Expenses for childcare

If you have children, you can deduct childcare costs – such as Kita (daycare) fees or school fees – from your tax return. As Munich-based expat tax advisor Thomas Zitzelsberger previously told The Local, two-thirds of the costs can be deducted as special expenses, up to a maximum of €4,000 per child.

READ ALSO: EXPLAINED: The tax cuts foreign parents in Germany need to know about

Long journeys to work

Taxpayers who have to travel long distances to work can claim these for tax purposes. For the first 20 kilometres, 30 cents each can be claimed as a lump sum. From the 21st kilometre onwards, they can even get 38 cents each – regardless of whether you travel by bike, car or train.

High expenses for professional activity

The Taxpayers’ Association (Bund der Steuerzahler) advises that anyone who makes expensive purchases for job-related reasons, or attends training courses that are not paid for by their employer, can deduct the expenses as income-related expenses. 

Working in a ‘home office’ can also increase income-related expenses. For each day of working from home, taxpayers can deduct a lump sum of €6.

READ ALSO: Germany to extend (and increase) tax rebate of people working from home

High ‘special payment’ (Sonderzahlung)

Whether it is a bonus for good work or severance pay for the early termination of an employment contract: one-off special payments can lead to a particularly high amount of income tax to be deducted by the employer – and often too much. If you file a tax return, you can get back the extra tax you paid on them.

Job-related move

Moving house for a new job? If you start a new position in another city, or return to a job after a posting abroad, you can include the costs of the move in your tax return.

But it’s not just the relocation itself that needs to be taken into account. You can also deduct travel expenses incurred in order to view flats, pay estate agents or even make double rent payments. Just make sure you document all of the costs.  

Costs directly related to the move, such as the renovation of the old flat, re-registration and the professional installation of lamps, can also be taken into account with the so-called flat rate for moving costs, wrote the advice portal “Finanztip”. Taxpayers can deduct up to €886 in their tax return – and if a spouse or partner, unmarried children, stepchildren or foster children also move, there is an additional €590 per person on top.

A piggy bank

A German piggy bank with euro notes. Photo: picture alliance/dpa/dpa-Zentralbild | Patrick Pleul

Paid church tax

“Anyone who is a member of a church in Germany has to pay up to nine percent church tax,” said Machnow from Taxfix. “The good thing is that it can be deducted.” 

For tax purposes, church tax is treated just like a donation and entered under special expenses. 

Energy relief payment not received

Taxpayers who did not receive the energy relief payment of €300 in to help with energy expenses in 2022 can get the money via the tax return. 

The tax office will automatically take the lump sum into account when it is submitted.

READ ALSO: What you need to know about Germany’s €300 energy relief payment 

High extraordinary burdens due to illness

Whether medical expenses, expenses for prescription drugs or the required wheelchair: “If taxpayers have incurred a particularly large amount of expenses for their own medical costs in one year, this can have a tax-reducing effect,” said the Taxpayers’ Association. The costs are entered under extraordinary burdens.

The prerequisite is that medical expenses exceed the reasonable burden limit. This depends on income, marital status and the number of children.

Capital gains

Have you sold any securities at a profit this tax year and received dividends? Then you could be eligible for a tax refund. If a taxpayer has paid 25 percent final withholding tax on capital gains, although their marginal tax rate is below 25 percent, he or she can have the difference refunded by the Steueramt.

According to the Taxpayers’ Association, this mainly affects low-income earners, pensioners and students.

Craftsmen’s services or energy-efficient building renovations

If craftsmen carry out work within your own four walls, it can be expensive at first. But the expenses can reduce the tax burden, wrote Finanztip. Twenty percent of the labour costs, but no more than €1,200, can be deducted. To do this, the total invoice amount needs to be entered in the annex “Household-related services”.

According to Finanztip, the tax savings can be significantly higher if the owner-occupied property is renovated. In this case, too, 20 percent of the costs can be deducted, up to a maximum of €40,000. For this purpose, the annex “Energy measures” (Energetische Maßnahmen) has to be filled out on your tax return. The prerequisite is, for example, that no state subsidy was claimed in order to carry out the work.

SHOW COMMENTS